Probe into failed Vodacom, V-Mobile deal

Johannesburg, 18 Jun 2004

Econet Wireless International (EWI) has welcomed reports that Nigeria`s main anti-corruption agency is to investigate the failed business deal between Vodacom SA and V-Mobile (formerly Econet Wireless Nigeria).

However, Vodacom says it has not been informed that it is the subject of such an investigation.

According to reports, the Economic and Financial Crimes Commission (EFCC) is set to "investigate the circumstances surrounding the withdrawal of Vodacom SA from EWN".

This follows the termination of a five-year management agreement between the two organisations - ostensibly by mutual agreement - just two months after it was signed, with Vodacom citing "irregularities" in the payment of brokerage fees.

The EFCC has claimed that its investigation is to determine to what extent transparency and corporate governance have been compromised in the relationship between the two companies.

However, Mthobi Tyamzashe, Vodacom group executive of corporate affairs, says as far as he is aware, Vodacom has not been contacted by the EFCC.

"The investigation is into V-Mobile, a Nigerian company, and the paying of brokerage fees. These happened before Vodacom signed its management agreement with V-Mobile. Vodacom is therefore not involved and has nothing to do with the investigation," he says.

The news of an investigation has been welcomed by the chairman and founder of Econet, Strive Masiyiwa, whose company, EWI, is involved in litigation with the above-mentioned organisations.

In response to the news, Masiyiwa says: "We are delighted to learn that action is being taken by the Nigerian government to investigate corrupt business practices and disclose any unethical dealings.

"The investigation is important not only for the sake of V-Mobile`s reputation, but also for the reputation of Nigeria and Africa as a whole, as the perception of corruption in business in Africa has put the continent at risk, and corrupt business practices are tarnishing our credibility and contributing to its state of decay."

He says that at the time Vodacom initiated discussions with the shareholders of V-Mobile, EWI had alleged that the brokerage fees were actually bribes, and had proceeded to warn Vodacom and its shareholders, although the cellular operator chose to go ahead with the discussions regardless.

Masiyiwa also alleges that his refusal to pay the commissions was responsible for the breakdown in the relationship with some of EWI`s Nigerian partners.

This breakdown ultimately led to a shareholder dispute, with Vodacom, rather than EWI being offered shares in the Nigerian operation, despite EWI`s claims that it had pre-emptive rights to purchase a further stake.

The company also has a dispute regarding the cancellation of its management contract with V-Mobile, which it claims was irregular and should therefore still be in force, despite the fact that the Nigerians signed a new deal with Vodacom (which they have now withdrawn from) for these services.

This dispute has been taken before an arbitrator appointed by the British Law Society and a hearing date has been set for 17 June, with a ruling anticipated sometime in August.

EWI spokesman Kevin Kachidza says his organisation has chosen to refrain from commenting upon a number of the legal issues, but has undertaken to assist the relevant authorities.

"We are quite prepared to offer any assistance we can to both the US Department of Justice and the EFCC during the course of the investigation. All they need to do is request our help," says Kachidza.